Tuesday, March 20, 2007

Calls of Note Part 2

- CIBC is out with a call on Digene (NASDAQ:DIGE) noting the stock has declined 25% since its earnings report last month, and is down 10% in the recent weeks since Roche filed its long-awaited (and delayed) PMA for Amlicor HPV. In their note, the firm details why they doubt Roche will be competitive, and argue that DIGE is a solid buy on the recent weakness.

Firm spoke with several investigators from Roche's clinical trial (who cumulatively performed over 4,000 samples) and they also spoke to their contacts at Roche. They found two key issues: 1) "clinical sensitivity" for Roche is inferior to Digene and 2) throughput on Amplicor will be an issue.

All investigators the firm spoke with said Roche's PCR-based diagnostic yielded too many false positives. They suspect Roche now increased the cutoff rate to improve results, but this would mean that new validation studies and LT follow-up are needed. CIBC feels this will delay Roche's approval.

The investigators were all very clear that "efficiency is king," and they noted that Amplicor is a much more manual process that requires hours of additional "hands-on" time. Firm's Roche contacts confirm this, and does not expect filing for their automated platform (TaqMan) for at least two years. Reits Sector Outperformer and $58 tgt.

Notablecalls:That's what I call research! CIBC's Amit Hazan has gone the extra mile for investors here and the results speak for themselves. To make things more interesting, note that TWP has downgraded DIGE to Market Weight from Overweight this morning as they are transferring the co from the Life Science industry while maintaining estimates. That may create some weakness but also a superb s-t buying opportunity as CIBC's comments should outweigh the downgrade. Think I'm going to call this one actionable.